Mar­ket In Cor­rec­tion Mode — Now Get Ready For Value Buy­ing!

Dalal Street Investment Journal - - CONTENTS - V B PADODE

Fi­nally, the bears had their say in the bull mar­ket. The much-awaited and re­quired cor­rec­tion in the stock prices, I am sure, has not sur­prised many of us. A cor­rec­tion is a nor­mal be­haviour of the mar­ket and should be seen as a buy­ing op­por­tu­nity. While the sen­ti­ment glob­ally may have changed from ‘risk-on’ to ‘risk-off’ mode, the long-term out­look for In­dian eq­ui­ties re­mains in­tact. There may be tem­po­rary blips in the cash flows com­ing into the mar­kets from re­tail in­vestors and FIIS. How­ever, the flows will re­sume as the sen­ti­ment im­proves. Smart in­vestors need to pad up and be pre­pared for in­ter­est­ing buy­ing op­por­tu­ni­ties if the mar­ket cracks fur­ther. In my view, the 31000-mark in Sen­sex will be a dif­fi­cult level to crack.

We bring a ‘CFO Special’ is­sue this time around as we think it is an op­por­tune time to cel­e­brate the con­tri­bu­tion of the best fi­nan­cial minds in Cor­po­rate In­dia. The CFOS are in­deed busi­ness lead­ers who are not only fi­nan­cial ex­perts but also pro­fes­sion­als who can steer a com­pany on to the growth tra­jec­tory, while keep­ing a tab on reg­u­la­tory and risk man­age­ment as­pects of the busi­ness. Read the cover story and un­der­stand how the lead­ing CFOS of In­dia think their com­pa­nies are placed today. Also, find about their top pri­or­i­ties and what they think of the econ­omy at this junc­ture.

One of the most im­por­tant is­sues plagu­ing the health of re­tail in­vestors’ port­fo­lio is un­wanted hold­ings of shares of com­pa­nies where the per­cent­age of pledged shares by pro­mot­ers is very high. We thought it will be in­ter­est­ing at this junc­ture to bring to our read­ers’ no­tice how the com­pa­nies with sig­nif­i­cant pledg­ing of shares by the pro­mot­ers have fared. Trust me, we have come out with some very use­ful in­for­ma­tion that may help you all (in fu­ture) to stay away from such un­wanted stocks.

One of the old­est doc­trines in the stock mar­ket has been that the stocks with higher pro­moter hold­ings tend to do well. Well, we thought let us check out if the doc­trine still holds true. I must say, the stocks with higher pro­moter hold­ings are the ones that should be pre­ferred, as­sum­ing ev­ery­thing else re­mains the same. We did ob­serve some sort of out­per­for­mance in stocks with higher pro­moter hold­ings.

In one of our special sto­ries we have talked about gold prices and how the de­mand and sup­ply equa­tion is shap­ing up for the pre­cious me­tal. ETF buy­ing has slowed in the H12017 and read the story for com­plete anal­y­sis and what may lie ahead in terms of Gold prices in H22017.

Any re­tail in­vestor in my mind will do good for him­self if he avoids buy­ing stocks with a com­bi­na­tion of higher debt-to-eq­uity ra­tio, pro­moter pledg­ing more than 50 per cent of their shares and lower pro­moter hold­ing in the com­pany. Just keep away from these stocks to keep your port­fo­lio healthy.

Com­ing back to the mar­kets, it is one of those sit­u­a­tions where the in­vestors’ faith will be tested. Do not panic and fo­cus on the stocks that you have iden­ti­fied for in­vest­ment. A case in point is Avanti Feeds. We had pre­vi­ously rec­om­mended the scrip in one of our is­sues (Is­sue dated 6-19th FEB at Rs 566) and it is do­ing ex­ceed­ingly well (CMP 1948 ). The stock has low debt, no pledg­ing of shares by pro­mot­ers and has pro­mot­ers’ hold­ing higher than 40 per cent.

The cur­rent mar­ket cor­rec­tion will pro­vide in­vestors an at­trac­tive en­try point once again.

Happy In­vest­ing !

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